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Benefits of Entity to be registered as Startup in Startup India Hub: 

For Registering Your Company as Valid Startup 

  • Eligibility of Entity to be registered as Startup in Startup India Hub
  • Recognition Provided by Department for Promotion of Industry and Internal Trade (DPPIT)

Eligibility Process is as follows under the start up hub: -

  1. Business must be incorporated as a Private Limited Company registered under the companies act, 2013, Partnership Firm under the partnership firm act or Limited Liability Partnership (LLPs) under LLP act.
  2. Business Officials should have followed all normal procedures such as obtaining COI/partnership registration, PAN and other requirements depending upon the type of entity.
  3. It should be a new firm or not older than ten years from date of incorporation or registration.
  4. The total turnover of the entity should be not exceeding 100 Crores.
  5. The firm must provide innovative schemes or products and entity Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment
  6. Entity should not have been formed by splitting up or reconstructing an already existing business.

Tax Benefits: -
Exemption under Section 80 IAC of Income Tax Act: -

  1. Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act.
  2. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.

    Meaning to the above statement:- The eligible startup business shall be allowed (in computing the total income of the assessee) a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for three consecutive assessment years out of five years beginning from the year in which the eligible start-up is incorporated.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

  • The entity should be a recognized Startup.
  • Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC.
  • The Startup should have been incorporated after 1st April, 2016

Further, after the amendment of Section 80IAC of the Income Tax Act, the startup registration is eligible for entities incorporated till 31st March, 2021.
It is not formed by splitting up, or the reconstruction, of a business already in existence.
 that this condition shall not apply in respect of a start-up which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as referred to in section 33B, in the circumstances and within the period specified in that section;
It is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation 1.— For the purposes of this clause, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if all the following conditions are fulfilled, namely:—
(a)  such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India;
(b)  such machinery or plant is imported into India;
(c)  no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee.

Explanation 2.—Where in the case of a start-up, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with.

The total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021.

Exemption under Section 56(2)(viib) of Income Tax Act: -
A Startup shall be eligible for notification under clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Act and consequent exemption from the provisions of that clause, if it fulfills the following conditions:

  1. it has been recognized by DPIIT under para 2(iii)(a) or as per any earlier notification on the subject
  2. aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees:

Provided that in computing the aggregate amount of paid up share capital, the amount of paid up share capital and share premium of twenty five crore rupees in respect of shares issued to any of the following persons shall not be included─ (a) a non-resident; or (b) a venture capital company or a venture capital fund;

Provided further that considerations received by such startup for shares issued or proposed to be issued to a specified company shall also be exempt and shall not be included in computing the aggregate amount of paid up share capital and share premium of twenty five crore rupees. It has not invested in any of the following assets,─

  1. building or land appurtenant thereto, being a residential house, other than that used by the Startup for the purposes of renting or held by it as stock-in-trade, in the ordinary course of business;
  2. land or building, or both, not being a residential house, other than that occupied by the Startup for its business or used by it for purposes of renting or held by it as stock-in trade, in the ordinary course of business;
  3. loans and advances, other than loans or advances extended in the ordinary course of business by the Startup where the lending of money is substantial part of its business;
  4. capital contribution made to any other entity;
  5. shares and securities;
  6. a motor vehicle, aircraft, yacht or any other mode of transport, the actual cost of which exceeds ten lakh rupees, other than that held by the Startup for the purpose of plying, hiring, leasing or as stock-in-trade, in the ordinary course of business;
  7. Jewellery other than that held by the Startup as stock-in-trade in the ordinary course of business;
  8. any other asset, whether in the nature of capital asset or otherwise, of the nature specified in sub-clauses (iv) to (ix) of clause (d) of Explanation to clause (vii) of sub-section (2) of section 56 of the Act.

the Startup shall not invest in any of the assets specified in sub-clauses (a) to (h) for the period of seven years from the end of the latest financial year in which shares are issued at premium;

Self Certification: -

The Startups shall be allowed to self-certify (through the Startup mobile app) with 6 labour and environment laws namely: -

  1. Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
  2. The Payment of Gratuity Act, 1972
  3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  4. The Contract Labour (Regulation and Abolition) Act, 1970
  5. The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
  6. The Employees’ State Insurance Act, 1948

In case of the labour laws, no inspections will be conducted for a period of 3 years.
Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer

Patent Application & IPR Protection: -
Start up receive a fast track and 80% rebate in filing patents.

Easier Public Procurement Norms: -
Entities Registrated as startup get a advantage in GeM “Government e Marketplace”.
It is an online procurement platform for government ministries and departments, and the most widely used channel for public procurement in India.  MSMEs, DPIIT recognized startups and other private companies can register on GeM as sellers and sell their products and services directly to government entities.
GeM Startup Runway is a new initiative launched by GeM to allow startups to reach out to the universe of government buyers by offering innovative products that are unique in design, process and functionality.
Register On GeM
Startups can create a seller profile on GeM using:

  1. DPIIT Recognition Number
  2. Mobile number used for Recognition
  3. PAN Number
  4. Aadhar Number

Easy Winding Up of Company: -
The companies registered as start up can within 90 days be winded up under the Insolvency Bankruptcy Code, 2016.

​Process for Registration for an Entity to be registered under Start up India (Under DPIIT):

1)      Go to Startup India Portal 
2)      Create a login Id of the Entity for the registration Process (as per the screen shot on right)

3)      Once, logged in, start with registration process by apply at the DPIIT Start up Recognition by simply
         clicking on the DPIIT Recognition as per the Screenshot on the Right: -

4)      After click on such, you will be reverted to screen showing a option to start or edit application of
         registration of company as startup.

5)      A screenshot of online form is below: -

6)      Following Details would be required before filling the form start up form. Details required for each point are as follows: -
(which can be seen in the screenshot above)
                             I.            Entity Details: - (Details of Entity as per the screenshot Right)

                            II.            Full Address (Office of the Entity: Can also be Other than Registered Office) 
                           III.            Authorized Representative Details (A.R. of the Company)

                           IV.            Enter the Details of Directors / Partners.
                            V.            Information Required about the start up: -
                           VI.            Start Up Activities: -

Under this, following details have to be mentioned by the entity for application for start up: -
1.      Mention any awards / recognition received by the entity, if any.
2.      Upload award documents accordingly for awards / recognition.
3.      Provide an explanation for “What is the problem the startup (entity) is solving?”
4.      Provide an explanation for “How does your startup (entity) propose to solve the problem?”
5.      Provide an explanation for “What is the uniqueness of your solution?”
6.      Provide an explanation for “How does your startup generate revenue?”

                          VII.            Self Certification: -
                            Ø  In the online form (as can be seen below), attached the incorporate certificate / registration certificate in pdf form.
                            Ø  Further, if the entity has any additional document such a pitch deck (presenting corporate profile) or patents, website link or any other promotional document issued by the entity to                                         promote its business activities can also be uploaded with the form.
                            Ø  After the form has been completed, lastly the entity for the application has to be submitted has to be certified by clicking near the option.

Once, the form has been completed with all required information, it will be submitted and DPIIT will reply based on the form/application submitted, the application may be approved with 2-5 business working days.

A certificate of Recognition will be available for the company once the application is accepted and DPIIT has recognized the entity as a startup.
Screenshot of Sample of the certificate of recognition is below-

Then Next Step is Filing of Form 2 with CBDT Authorities,  for claiming exemption from section 56(2)(viii)(b) of Income Tax.

This would enable getting any valuation for the shares of the company; any startup without any share valuation or report of Merchant Banker.

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